Bears convince govt won't fall

The markets are holding their nerve going into tomorrow’s confidence vote. If there were fears of the government not being able to make it through the confidence vote, then it would certainly have reacted. It looked like it was going to do that early in the morning, but it did not. Every time it came down, it managed to go back. Finally, we closed the day a couple of hundred points higher, which is no mean feet given the kind of uncertainty that still prevails. There is conviction everywhere that the government’s vote of confidence is a done deal.

The Nifty too has moved about 60 points to above 4,150, which is not bad. We have moved forward and the markets are going into that important session tomorrow with a little bit of confidence built behind its belt. Pharma, banks, power, and telecom stocks, made the market move up today.

It was a bad day under the circumstances. One could point a finger to Asian markets and the strong rally that we saw in most of those markets and feel a bit disappointed. But when you are heading into a vote of confidence for the government and are not sure whether the government lasts the next 24 hours or not, then you don’t tend to look at rallies in Taiwan and Korea. You are pretty much focused homeward. Given the circumstances, we have come out a couple of hundred points higher on the Sensex. So, it’s not a bad result at all today

Market also don’t see terribly unsettled at this point. The reactions to results are pretty much what they should be. Cipla went up after earnings yesterday, while IDFC fell after a disappointing conference call. Stocks are still pretty much doing what they should be doing in the normal course of events. Satyam is still reacting after a bit of disappointment last week. If the market was in a complete funk because of what is going to come tomorrow, then you would have seen very extraordinary price movements, but that is not happening.

At best, one can say that there was a lot of indecision and lack of participation today that is why the volumes got stuck at Rs 55,000 crore, which in this kind of market condition is not a lot. Volumes clearly betray a lack of conviction. If you look at the Nifty futures premium, the discount is gone now. We are trading at a premium and that indicates that most bears have probably covered up their positions going into that key event tomorrow. So, the bears don’t have any conviction at all that the government is going to fall. Everything suggests that the market is probably looking at tomorrow’s event with a little bit of hope. It passed off as a stable day of trade. There was huge intraday volatility, but under the circumstances one would want to call it as stable.